Neither intermediate goods nor used goods are included in GDP. Explain why these expenditures are not included in GDP
What will be an ideal response?
Intermediate goods and used goods are not included in the measurement of GDP because they do not represent final expenditures on goods and services produced within the relevant time period. Intermediate goods are inputs used in the production of final goods and services. To count them twice would be double counting and inflate the level of GDP. Used goods already have been counted in GDP during the year in which they were produced. They were not produced in the current time period and therefore are not included in GDP.
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Indicate whether the statement is true or false
A constitutional amendment is passed that requires the government to have an annually balanced budget in the sense that changes in spending should be matched by equivalent changes in taxes. Should the government desire to increase GDP by $25 billion and meet the provisions of the law it:
A. Cannot possibly reach its objective without breaking the law B. Could increase spending by $25 billion and reduce taxes by $25 billion C. Could increase spending by $25 billion and increase taxes by $25 billion D. Could increase spending by $30 billion and increase taxes by $25 billion